The Dallas Morning News is musing whether TXU’s debt problems might mean higher electricity rates in Dallas. If they are right it would mean higher electric rates not just for TXU customers. The Dallas electric provider is the majority owner of Oncor which manages the lines regardless of who your retail electric provider is.
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The U.S. Congress adjured in 2011 leaving lots of unfinished business, unanswered questions and uncertainty. Among many lingering questions is the future of wind energy subsidies. Federal subsidies for wind generated electricity have been in existence since 1992. However, these are set to run out at the end of 2012 leaving the market facing uncertainty.
In addition to federal subsidies, many states have passed renewable energy mandates requiring that renewable energy sources like wind be used for a certain percentage of the state’s electricity production. All of this has allowed the wind industry and wind technology to thrived in recent years. Wind technologies have advanced to the point that its energy can be produced nearly as economically as other resources like natural gas or coal.
However, the difficult current economic climate and the resulting budget crisis may spell the end, or at least a substantial reduction, of government subsidies for wind power, along with other renewable sources of generating electricity such as hydro and solar power. The question for the wind power industry is whether or not the technologies have come far enough to make sure that electricity from wind can continue to be competitive on a cost basis. In the free market, price is ultimately the most important consideration.
Wind generated electricity has many benefits. Wind can provide clean and endless electricity. However, environmental cleanness isn’t the only consideration in a free market. A significant challenge for the wind industry is continued low production costs even if government subsidies and mandates decrease or end. For quite a while the trend in fossil fuels has been towards higher prices. This should theoretically give wind and other renewable energy sources a chance moving forward.
However, the natural gas industry is still a strong cost competitor to renewable energy. For instance, new shale drilling techniques in Texas have successfully decreased natural gas costs for consumers for the past several years. A significant portion of Texas electricity comes from natural gas burning plants. As a result electricity rates in Houston Texas are the cheapest they have been in years. Because of this, the wind industry faces a big cost challenge for the foreseeable future.
A major complaint about wind electricity is that it doesn’t produce electricity consistently and predictably. After all, simply building wind turbines doesn’t guarantee that the wind will blow to turn them. If wind turbines don’t turn they don’t generate electricity. As there are no effective technologies to control the wind, there is no good way to calculate how much electricity will be generated at any given moment from a particular wind turbine. This means that down the road if wind generated electricity is going to be an important part of our energy mix you need to have an effective way of storing the electricity that is produced during peak production and returning it back into the grid at times of higher demand. There are several interesting technologies on the horizon for solving this problem, but today none are at a stage where they could be deployed on a large-scale and to great effect.
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